M/S. CHORUS MACHINEERIES and 4 ORS. vs DILIP CH. BARUAH and ANR.

1.By filing these two petitions under Section 482 CrPC registered as Crl. Petition No. 895/2016 and Crl. Petition No. 623/2017 respectively, the

petitioners have prayed for quashing the proceedings in the CR case No. 1991C/2016 under section 406/34 IPC and the FIR dated 13-02-2017 as well

as the proceeding in PS Case No. 84/2017 under Sections 406/468/420 IPC.

The brief facts of the case are that the respondent No. 1 was a partner of the petitioner No. 1, M/s Chorus Machineries, a partnership firm which

was running its business since 1982. Initially the respondent No. 1 and the petitioner No. 2 & 3 were the partners of the firm (petitioner No. 1). The

respondent No. 1 retired from the aforesaid partnership firm w.e.f. 31.03.2011 and a written agreement was executed to that effect, vide agreement

dated 12/9/2011. By the said agreement, petitioner No. 4, Anirban Kundu was inducted as a new partner. As per clause 3 of the said agreement, the

new partner, respondent No. 4, agreed and undertook to repay the entire capital contribution standing in the account of the retiring partner, i.e., the

respondent No. 1, on the date of retirement, from his own source. In Clause 4 of the agreement it was stipulated that the retiring partner (respondent

No. 1) assigns and transfer all his shares, rights, title and interest in the permits and licenses held by the firm. It was averred in the complaint, that till

4-1-2016, the complainant was entitled to get a sum of Rs. 2,48,80,547/- from the petitioners and the petitioners were supposed to pay the aforesaid

amount on 31-5-2016. But except making payment of Rs. 2 lakhs on 6-4-2016 and 2-6-2016, the petitioners did not pay any amount and

misappropriated the entire money. The respondent 1 sent a legal notice informing the detailed of his entitlement, but the petitioners did not respond to

the same. It was alleged in the complaint that the petitioners have committed criminal breach of trust from the date of retirement of the respondent

No. 1 and as such, he lodged the complaint. On the basis of such complaint, learned Judicial Magistrate took cognizance of offence u/s 406/34 IPC

against the petitioners and issued process.

Aggrieved by the said order of taking cognizance, the petitioners approached this Court by filing application u/s 482 CrPC, for quashing the

proceedings, which was registered as Criminal Petition No. 895/2016. The petitioners produced the balance sheet of the firm (petitioner No. 1) for the

year ending on 31.03.2011 alongwith the petition u/s 482 CrPC in the Crl. Petition No. 895/16. On receipt the notice of the Criminal Pet. No. 895/2016

and the copy of balance sheet, the respondent No. 1 again lodged an FIR, alleging that though, he retired from the firm (petitioner No. 1) w.e.f.

31.3.2011 and the agreement to that effect was executed on 21.9.2011, the balance sheet for the year ending on 31st March, 2011 was not prepared

at the time of executing the retirement agreement. From the balance sheet produced before the court in Crl. Petition No. 895/2016, the respondent

No. 1 could come to know, that the ‘opening brought forward’ capital of the respondent No. 1 was shown as Rs.37,67,925.19 instead of Rs.

43,51,918.31/-. It was stated that by not including the actual amount of capital ‘brought forward’ in the balance sheet, the petitioners have

committed fraud. It was also stated in the FIR, that the petitioners were liable to produce the bank statement in support of the said entry in the balance

sheet. On the basis of the said FIR, police registered a case u/s 406/468/420 IPC.

Aggrieved by the registration of the case on the basis of the FIR u/s 406/468/420 IPC, the petitioners filed the second petition under Section 482

CrPC for quashing the police case too.

Learned advocate, Mr. C.P.Sharma assisted by learned advocate, Mr. A. Chamuah for the petitioners in both the petitions and learned advocate,

Mr. A.K. Sarma assisted by learned advocate, Mr. S.P. Deka for the respondents were heard.

Learned counsel for the petitioners contended, that no ingredient of criminal offence was made out either in the complaint or in the FIR, as the

entire transaction between the parties were commercial transaction involving out and out civil liabilities without having any ingredient of criminal

offence, and as such, the complaint case and the FIR are liable to be quashed in order to prevent the abuse of the process of the court. In support of

his submission, learned counsel placed reliance on the decision of the Apex Court in Binod Kr. & Ors. â€"VS- State of Bihar and Anr. (2014) 10 SCC

663 and G. Sagar Suri and Anr. Vs- State of U.P. & Ors., reported in (2000) 2 SCC 636.

The Apex Court, in G. Sagar Suri and Anr. â€"VS- State of U.P. (supra) sounding a note of caution to the criminal courts, that the court should

exercise great deal of caution, while issuing process, more particularly in cases, which are essentially of civil nature observed as under :-

“Jurisdiction under Section 482 of the Code has to be exercised with great care. In exercise of its jurisdiction the High Court is not to examine the

matter superficially. It is to be seen if a matter, which is essentially of a civil nature, has been given a cloak of criminal offence. Criminal proceedings

are not a shortcut of other remedies available in law. Before issuing process a criminal court has to exercise a great deal of caution. For the accused it

is a serious matter. This Court has laid certain principles on the basis of which the High Court is to exercise its jurisdiction under Section 482 of the

Code. Jurisdiction under this section has to be exercised to prevent abuse of the process of any court or otherwise to secure the ends of justice.â€​

In Binod Kr. & Ors. â€"VS- State of Bihar (supra), the Apex Court held that to make out a case of criminal breach of trust, it is not sufficient to

show that the money has been retained by the appellants. It must also be shown that the appellants dishonestly disposed of the same in some way or

dishonestly retained the same. The mere fact that the appellants did not pay the money to the complainant does not amount to criminal breach of trust.

Refuting the submission of the learned counsel for the petitioners, the learned counsel for the respondent No. 1 submits, that the allegations made in

the complaint or FIR containing civil profile or disclosing civil liability having civil remedies, is hardly a ground for quashing a criminal proceeding at the

threshold. If the allegations made in the FIR or complaint make out criminal offence, in such case, the criminal proceeding cannot be quashed merely

for the reason, that alternative civil remedy is available, submits Mr. A.K. Sarmah. In support of his submission, learned counsel, placed reliance on

the following decisions :-

1) 1999 3 SCC 259 (Rajesh Bajaj â€"VS- State NCT of Delhi and Ors.)

2) 2001 3 GLT 277 (Bhaskar Jyotideâ€"VS- M/s Pegasus Capital and Allied Services Ltd)

3) 1999 8 SCC 686, (Trisuns Chemical Industry â€"VS- Rajesh Agarwal and Ors.)

The Apex Court, in Rajesh Bajaj-VS- State NCT of Delhi and Ors. (supra) dealing with the complaint involving civil profile held as under :-

“It may be that the facts narrated in the present complaint would as well reveal a commercial transaction or money transaction. But that is hardly a

reason for holding that the offence of cheating would elude from such a transaction. In fact, many a cheatings were committed in the course of

commercial and also money transaction. One of the illustrations set out under Section 415 of the Indian Penal Code [illustration f] is worth of notice

now.â€​

In Bhaskar Jyotideâ€"VS- M/s Pegasus Capital and Allied Services Ltd (supra), this Court following the Apex Court in Rajesh Bajaj case held

that “the allegations made in the complaint in the present case reveal a civil dispute between the parties cannot be a ground for quashing the

complaint so long as the allegations in the complaint also reveal commission of an offenceâ€​.

In Trisuns Chemical Industry â€"VS- Rajesh Agarwal (supra), the Apex Court held that the provision incorporated in the agreement between the

parties for referring the dispute to arbitration, is not an effective substitute for a criminal prosecution, when the disputed act constitutes an offence.

The Apex Court observed that only because an arbitration clause is included in the agreement is not a good reason for the High Court to axe down the

complaint at the threshold itself, as the investigating agency should have had the freedom to go into the whole gamut of allegations and to reach a

conclusion of its own. Pre-emption of such investigation would be justified only in extreme cases.

The common thread passing through all the above authorities relied by the learned counsel for the respondent appears to be, that so long as the

complaint or FIR discloses criminal offence, such complaint or FIR cannot be quashed in the exercise of power u/s 482 CrPC, only because of the

fact, that alternative civil remedies are available. It is trite law, that when the same set of facts discloses civil liability and also constitute a criminal

offence, quashing of the proceeding on the ground, that civil remedy is available is not permissible. Crucial point to be considered in such cases is

whether the complaint or the FIR makes out any offence. If the allegations make out any offence, proceeding cannot be quashed u/s 482 CrPC only

because of availability of civil remedy.

Keeping in view the above principles and proposition of law, let me now advert to the facts of the complaint case as well as the police case arising

out of the FIR individually.

In the complaint, which is sought to be quashed in the criminal Petition No.895/2016, the allegations were that the respondent was a partner of the

firm (petitioner No. 1) and they were carrying on business since 1982. The respondent No. 1 decided to retire from the firm w.e.f. 31.3.2011 and a

written agreement was executed to that effect. As per the written agreement, copy of which was annexed with the complaint as Annexure- A, the

petitioner No. 4 was inducted as a new partner of the firm. As per Annexure-A, the written agreement, the partnership capital contributed by the

respondent No. 1 was converted to the partnership capital of the petitioner No. 4 and whatever amount, the respondent No. 1 was entitled to receive

from the petitioner No. 1 on the date of his retirement, should be paid by the petitioner No. 4 from his source. It was stated in the complaint, that the

accused persons (petitioners herein) were supposed to pay the entire amount due to the respondent No. 1, by 13-5-2016. It was further averred in the

complaint that the (respondent No. 1) did not get the entire amount, except some amount paid on 06.04.2016 and 02.16.2016 respectively, due to mala

fide intention of the petitioners to misappropriate the entire money. Apparently, as per the terms of the agreement, Annexure-A to the complaint,

petitioner No. 4, the newly inducted partner, undertook to pay the dues to the respondent No. 1 and not by other petitioners. There was no allegation in

the complaint at all, that the petitioner No. 4 dishonestly disposed of the property or retained the same dishonestly. The offence of criminal breach of

trust has been defined u/s 405 of the IPC which reads as under :-

Sec. 405. whoever, being in any manner entrusted with property or with any dominion over property, dishonestly misappropriates or dishonestly

converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which

such trust is to be discharged, or of any legal contract, express or implied which he has made touching the discharge of such trust, or wilfully suffers

any other person so to do, commits ‘criminal breach of trust.’

As per definition of the offence of criminal breach of trust, in order to constitute an offence u/s 405 IPC the essential ingredients required to be

proved are that : the accused must be entrusted with the property or dominion over the property, (ii) such property should be dishonestly

misappropriated or converted to his own use by the accused and (iii) dishonestly disposed of the property in violation of the direction or mode, in which

the trust was to be discharged. Therefore, mere misappropriation or use of the property shall not be sufficient to constitute the offence of criminal

breach of trust.

Averment made in the complaint and the documents relied by the respondent No. 1, show, that the respondent No. 1 was a partner of the firm

(petitioner No. 1) since 1982 and they have been carrying on business smoothly and even after his retirement, as per the agreement entered into

between the parties, he received a sum Rs. 2 lakhs on two different dates and last payment was received by him on 02.06.2016 and the complaint was

lodged on 20.06.2016. Thus, the allegations made in the complaint, making a bald statement that the petitioners misappropriated the whole money

payable to the complainant, without disclosing anything therein even to show prima facie, that the petitioners have dishonestly disposed or dishonestly

retained the property, is not sufficient to constitute an offence of criminal breath of trust. The allegations made in the complaint simply disclose that the

respondent No. 1 did not get the ‘whole’ amount due to him, as per his own assessment, because of intention of the petitioners to

misappropriate the amount. What the complaint discloses was that the petitioners harboured dishonest intention to misappropriate the property. There

is no clear allegations, that the petitioners have misappropriated the property concerned. Mere intention does not constitute any offence. When

evidently the transaction between the parties were commercial and essentially of civil nature, unless the complaint clearly discloses criminal offence or

ingredients of criminal offence/offences, the process should not be issued in a very light manner, inasmuch as, issuance of process or summons against

a person in a criminal proceeding affects the right of the parties. The allegations made in the complaint, at best, discloses, that petitioners did not pay

the money due to the respondent No. 1, which alone does constitute an offence of criminal breach of trust as held by the Apex Court in Binod Kumar

and Ors. Vs. State of Bihar (supra) and the present case is squarely covered by the ratio of the Binod Kumar’s case.

The averment made in the complaint and the Annexure-A, the agreement, entered into between the parties clearly, demonstrated that the dispute

in the instant case between the parties was out and out of civil nature and the complaint did not disclose the ingredients of offence of criminal breach

of trust. On the facts and circumstances, it appears to be a case, where the complainant had taken a shortcut method to create pressure on the

petitioners by way of giving criminal favour to a civil dispute. Therefore, this Court is of the view, that allowing such a proceeding to continue, would

amount to abuse of process of the court.

Now, let us come to the Crl. Pet. 623/17, where the quashing of the FIR lodged by the respondent No. 1 is sought for. The allegations made in the

FIR, as indicated above, was that upon receiving the notice of the criminal petition No. 895/16 and the balance sheet of the petitioner No. 1, for the

year ending on 31st March, 2011, the respondent No. 1 came to know, that the entry made in the balance sheet, with regard to the ‘’brought

forward opening capital’’ against the respondent No. 1, was not correct. According to the respondent no. 1, the amount should have been

Rs.43,51,918.31. However, in the balance sheet, the amount was shown as Rs.37,67,925.19. It was also stated in the FIR that by making such wrong

entry in the balance sheet, the petitioners have defrauded the respondent No. 1 and committed offence of cheating u/s 420 IPC.

In order to constitute an offence of cheating u/s 420 IPC, the following essential ingredients are necessary :-

(i) there must be deception i.e., the accused must have deceived someone.

(ii) that by such deception the accused must induce a personâ€"(a) to deliver any property, (b) to make, alter or destroy the whole or part of the

valuable security or anything which is signed or sealed and which is capable of being converted to valuable security, (iii) the accused did so

dishonestly.

The mere allegation made in the FIR, that the entry made under the heads, ‘opening brought forward capital’ against respondent No. 1

should have been Rs.37,67,925.19 instead of Rs. 43,51,918.31/- does not disclose any of the ingredients of offence u/s 420 IPC, reason being that

there was no allegation of deception or dishonest inducement to the respondent No. 1 by the petitioners, nor any allegation of the respondent No. 1

delivering any property as a result of such deception or dishonest inducement. Mere error or wrong entry in the balance sheet of an organization for a

particular year, which is a routine exercise, without anything more, in my considered view, even does not disclose any cognizable offence entitling the

police to register an FIR u/s 154 of the CrPC.

As per the guidelines laid down in State of Haryana Vs. Bajanlal, the Apex Court held that when the allegations made in the FIR and other

materials accompanying the FIR do not disclose a cognizable offence justifying an investigation by police officer u/s 156 (1) of the CrPC, except under

an order of magistrate within the purview of Section 155 (2) of CrPC, such FIR or complaint deserves to be quashed. The allegations made in the FIR

involved in Crl. Pet. 623/17 makes it abundantly clear, that no cognizable offence was made out. When the FIR did not disclose the ingredients of

offence u/s 420 IPC as alleged, or any other cognizable offence, the police did not have the jurisdiction to register a case or initiate investigation on the

basis of the FIR involved in the instant case in view of Section 155 (2) and Section 156 (1) CrPC. Therefore, this court is of the view, that registering

the case on the basis of the FIR, which did not disclose any cognizable offence and proceeding with the investigation was beyond the jurisdiction of

the police.

Thus, having regard to the scope of interference with the criminal proceeding at the threshold in the exercise of inherent power and the allegations

made in the complaint as well as the FIR, involved in the Crl. Pet. No. 895/16 and Crl. Pet. No. 623/17, this Court is inclined to concur with the

submission made by the learned counsel for the petitioners that both the complaint as well as the FIR failed to make out any offence and the dispute

involved therein was purely civil dispute having no criminal ingredient. Therefore, allowing such criminal proceedings to continue would amount to

abuse of process of the Court.

Being of the above view, the proceeding in CR case No. 1991C/2016 as well as the FIR and proceeding in PS Case No. 84/2017 arising out of

such FIR are hereby quashed.

Both the petitions stands allowed and disposed of accordingly.